tds and cash payments

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This query is : Resolved

Vikrant Chadha (Querist)

31 May 2009 Dear Sir,
We are in the transport business.
Trucks employed by us are through truck suppliers [ Transport Companies].We have to pay these company advance against freight. They do not accept checks even though the amounts are above twenty thousand - as they have to give cash to the drivers for way expences --sometimes when the freight is to the tune of one or two lacs we have to give them cash as we have to give at least 70% of the feight as advances.
How are we supposed to pay -- CAN WE PAY IN CASH AND SHOW IT IN THE BOOKS or WE BREAK UP THE AMOUNT AND PAY 20000/ PER DAY TILL THE AMOUNT IS COMPLETE ??
How should we pay and make entries in the books?
Ref:-
SECTION 40A(3)/RULE 6DD : BUSINESS DISALLOWANCE - CASH PAYMENTS EXCEEDING PRESCRIBED LIMIT - PRESCRIBED CASES & CIRCUMSTANCES IN WHICH PAYMENT IN SUM EXCEEDING - PRESCRIBED LIMIT MAY BE MADE OTHERWISE THAN BY CHEQUE
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2. Payments to Central and State Governments, if the rules framed by such a Government provides for payment in legal tender, such as payment of direct taxes, customs or excise duties, sales tax, railway freight, etc. Thus, in case of payments made to railways on account of railway freight charges or for booking wagons, section 40A(3) will not apply - See Circular No. 34, dated 5-3-1970.
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11. Payment made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person.
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When Rail freight can be paid in cash why not Truck freight??

CA.BHARAT BHUSHAN

CA.BHARAT BHUSHAN (Expert)

31 May 2009 I think this is the only way suggested, otherwise department will not get agree.

Ratan Sharma

Ratan Sharma (Expert)

01 June 2009 If you make the payment exceeding Rs. 20000 in cash in a day certainly sec. 40A(3) will apply. Therefore make every entry below 20000/- in cash in a day and debit to freigh account as and when the bill received. payment of railway freight is exempted as it is paid to government account whereas transport freight is not exempted as it is paid to private parties. No alternate solution.

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